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Google first demoed Google Wallet two years ago in its New York City offices. But nothing much has come of the app that promised to make your phone a wallet.

Google has hardly abandoned the idea of letting customers tap, pay and save using their Android devices and near field communication. Google Wallet is still a key part of the company's ongoing effort to improve shopping on both sides of the checkout counter.

But Google has rolled out a new concept at its I/O developers conference in San Francisco -- one that might trouble PayPal. Google is setting up a function to allow U.S.-based adult Gmail users attach electronic money to an e-mail. Google Wallet is still at the center, but you don't need a phone to make the transaction.

"Paying back your friends is now as simple as sending an e-mail, whether you're chipping in for lunch or reimbursing your roommate for your share of the rent," said Travis Green, product manager for Google Wallet, in a blog post. "Google Wallet is now integrated with Gmail, so you can quickly and securely send money to friends and family directly within Gmail -- even if they don't have a Gmail address."

As Simple as Attaching a File

Here's how it works: When you open up your Gmail and compose a message, you'll see a dollar sign ($) in the row of icons at the bottom, just to the left of the icon you click to attach a photo. When you click the icon, you'll be prompted to enter the amount of money you want to transmit. Press "send" and the transaction is complete.

Sending money is free if your bank account is linked to Google Wallet or using your Google Wallet balance. You will pay a fee if you send money using your linked credit card or debit card. Specifically, you'll pay a flat fee of 2.9 percent per transaction. The minimum fee is 30 cents.

Receiving money is always free regardless of the funding source the sender chooses. That's a departure from PayPal, which charges a fee to the recipient unless it's a friend or family member. There's a transaction limit of $10,000 and a $50,000 transfer limit per five-day period. The transaction is nearly instant -- it could take a couple of minutes to process -- unless you use your bank account to send money. That can take up to 10 days to complete.

Reviving Google Wallet

Greg Sterling, principal analyst at Sterling Market Intelligence, said linking Google Wallet to Gmail has great potential because Gmail already has a huge installed base. He added, however, that users must be willing to associate their bank accounts with their Gmail or Google accounts. There may be some friction or unwillingness to do so.

"If it works it could be quite a significant boost for Google's embattled Wallet program, which recently lost its product manager and saw the last-minute decision not to introduce a physical payment card -- to broaden the mainstream appeal of the service," Sterling said.

Google Wallet is a combined product that includes online payments and smartphone-based payments using NFC. Sterling told us Google underestimated the and consumer challenges involved in getting people to use NFC payments and the time it would take for adoption.

"Currently there's limited awareness of the NFC-mobile side of Google Wallet and even less usage," Sterling said. "E-mail-based money transfers could become a successful product if Google can build awareness and trust among users."